UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 14, 2018 ALJ Regional Holdings, Inc. (Exact name of Registrant as Specified in Its Charter) Delaware 001-37689 13-4082185 (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 244 Madison Avenue, PMB #358 New York, NY 10016 (Address of Principal Executive Offices) (Zip Code) Registrant s Telephone Number, Including Area Code: (212) 883-0083 (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( 240.12b-2 of this chapter). Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition. On May 14, 2018, ALJ Regional Holdings, Inc. (the Company ) issued a press release announcing its earnings for the second quarter ended March 31, 2018. The press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Item 7.01 Regulation FD Material. On May 14, 2018, the Company issued a news release announcing its earnings for the second quarter ended March 31, 2018, a copy of which is attached as Exhibit 99.1 hereto and incorporated herein by reference. Item 9.01. Financial Statements and Exhibits. (d) Exhibits. EXHIBIT NUMBER DESCRIPTION Exhibit 99.1 Earnings Release dated May 14, 2018 This Form 8-K and Exhibit 99.1 hereto shall be deemed furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any registration statement of the issuer, except as shall be expressly set forth by specific reference in such filing.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ALJ REGIONAL HOLDINGS, INC. May 14, 2018 By: /s/ Brian Hartman Name: Brian Hartman Title: Chief Financial Officer
Exhibit 99.1 ALJ REGIONAL HOLDINGS, INC. ANNOUNCES EARNINGS FOR THE SECOND QUARTER ENDED MARCH 31, 2018 AND REVISES FISCAL 2018 GUIDANCE NEW YORK, NY, May 14, 2018 ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ( ALJ ) announced results today for its second quarter ended March 31, 2018. ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. (including the customer management outsourcing business recently acquired from Vertex Business Services LLC, Faneuil ), Floors-N-More, LLC, dba Carpets N' More ( Carpets ), and Phoenix Color Corp. (including the recently acquired printing components business, Phoenix ). Faneuil is a leading provider of call center services, back office operations, staffing services, and toll collection services to government and regulated commercial clients across the United States. Carpets is one of the largest floor covering retailers in Las Vegas, Nevada, and a provider of multiple products for the commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with four retail locations, as well as a stone and solid surface fabrication facility. Phoenix is a leading manufacturer of book components, educational materials and related products producing value-added components, heavily illustrated books and specialty commercial products using a broad spectrum of materials and decorative technologies. Our financial statements reflect the operations of Faneuil, Carpets and Phoenix throughout all periods presented, Faneuil s customer management outsourcing business ( CMO Business ) since May 26, 2017, and Phoenix s recent acquisition of certain assets and liabilities ( Printing Components Business ) from Moore-Langen Printing Company, a division of LSC Communications, Inc., since October 2, 2017. Investment Highlights Three and Six Months Ended March 31, 2018 Consolidated Results for ALJ ALJ recognized consolidated revenue of $95.1 million for the three months ended March 31, 2018, an increase of $15.8 million, or 19.9%, compared to $79.3 million for the three months ended March 31, 2017 due to the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $12.1 million of the total revenue increase, and increases in business activity in the Faneuil and Carpets segments. Excluding the impact of acquisitions, total revenue increased $3.7 million, or 4.7%. ALJ recognized consolidated revenue of $95.0 million for the three months ended December 31, 2017. ALJ recognized a net loss of $0.3 million and a loss per share of $0.01 (diluted) for the three months ended March 31, 2018, compared to net income of $0.4 million and earnings per share (EPS) of $0.01 (diluted) for the three months ended March 31, 2017. Increased revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, higher start-up costs of certain contracts, and higher selling, general and administrative costs due to increased depreciation and amortization expenses related to acquisitions. ALJ recognized net loss of $5.3 million and loss per share of $0.14 (diluted) for the three months ended December 31, 2017, which included an increased provision for income taxes to reflect a one-time, non-cash deferred income tax expense of $4.1 million as a result of the Tax Cuts and Jobs Act of 2017. Excluding such deferred income tax expense, ALJ recognized net loss of $1.2 million and loss per share of $0.03 (diluted) for the three months ended December 31, 2017. ALJ recognized adjusted EBITDA of $7.6 million for the three months ended March 31, 2018, a decrease of $0.1 million, or 0.9%, compared to $7.7 million for the three months ended March 31, 2017. Adjusted EBITDA was flat due to higher labor, material, and customer service costs at Carpets, and transition expenses associated with the CMO Business acquisition, which offset increased net revenue from acquisitions. ALJ recognized adjusted EBITDA of $6.6 million for the three months ended December 31, 2017.
ALJ recognized consolidated revenue of $190.1 million for the six months ended March 31, 2018, an increase of $33.1 million, or 21.1%, compared to $156.9 million for the six months ended March 31, 2017 due to the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $25.1 million of the total revenue increase, and increases in business a ctivity in the Faneuil and Carpets segments. Excluding the impact of acquisitions, total revenue increased $8.1 million, or 5.1%. ALJ recognized a net loss of $5.7 million and loss per share of $0.15 (diluted) for the six months ended March 31, 2018, compared to net income of $0.9 million and earnings per share (EPS) of $0.03 (diluted) for the six months ended March 31, 2017. Increased revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, higher start-up costs of certain contracts, higher selling, general and administrative costs due to increased depreciation and amortization expenses related to acquisitions, and increased provision for income taxes to reflect a one-time, non-cash deferred income tax expense of $4.1 million as a result of the Tax Cuts and Jobs Act of 2017. Excluding such deferred income tax expense, ALJ recognized net loss of $1.6 million and loss per share of $0.04 (diluted) for the six months ended March 31, 2018. ALJ recognized adjusted EBITDA of $14.2 million for the six months ended March 31, 2018, a decrease of $0.7 million, or 4.8%, compared to $14.9 million for the six months ended March 31, 2017. The decrease wa s due to higher labor, material, and customer service costs at Carpets, lower volumes for books and packaging at Phoenix, and transition expenses associated with the CMO Business acquisition, which offset increased net revenue from acquisitions. ALJ estimates consolidated revenue for the three months ending June 30, 2018 to be in the range of $80.2 million to $88.8 million, compared to $83.5 million for the three months ended June 30, 2017. Jess Ravich, Executive Chairman of ALJ, said, We continue to invest and support each of our businesses, with a focus on growing revenues and EBITDA while lowering our overall cost structure in order to increase shareholder value. Amounts in $000's, except per share amounts Three Months Ended March 31, Net revenue $ 95,105 $ 79,296 $ 15,809 19.9% Costs and expenses: Cost of revenue 74,239 61,007 13,232 21.7% Selling, general, and administrative expense 18,822 14,914 3,908 26.2% (Gain) loss on disposal of assets, net (25) 4 (29) NM Total operating expenses 93,036 75,925 17,111 22.5% Operating income 2,069 3,371 (1,302) (38.6%) Other expense: Interest expense, net (2,793) (2,284) (509) (22.3%) Total other expense (2,793) (2,284) (509) (22.3%) (Loss) income before income taxes (724) 1,087 (1,811) NM Benefit (provision) for income taxes 384 (695) 1,079 NM Net (loss) income $ (340) $ 392 $ (732) NM Basic (loss) earnings per share of common stock $ (0.01) $ 0.01 $ (0.02) Diluted (loss) earnings per share of common stock $ (0.01) $ 0.01 $ (0.02) Weighted average shares of common stock outstanding: Basic 37,911 34,575 3,336 Diluted 37,911 35,644 2,267 NM - Not Meaningful 2
Amounts in $000's, except per share amounts Six Months Ended March 31, Net revenue $ 190,059 $ 156,913 $ 33,146 21.1% Costs and expenses: Cost of revenue 149,149 121,188 27,961 23.1% Selling, general, and administrative expense 38,360 29,297 9,063 30.9% (Gain) loss on disposal of assets, net (232) 12 (244) NM Total operating expenses 187,277 150,497 36,780 24.4% Operating income 2,782 6,416 (3,634) (56.6%) Other expense: Interest expense, net (5,453) (4,718) (735) (15.6%) Total other expense (5,453) (4,718) (735) (15.6%) (Loss) income before income taxes (2,671) 1,698 (4,369) NM Benefit (provision) for income taxes (2,987) (755) (2,232) NM Net (loss) income $ (5,658) $ 943 $ (6,601) NM Basic (loss) earnings per share of common stock $ (0.15) $ 0.03 $ (0.18) Diluted (loss) earnings per share of common stock $ (0.15) $ 0.03 $ (0.18) Weighted average shares of common stock outstanding: Basic 37,742 34,575 3,167 Diluted 37,742 35,671 2,071 NM - Not Meaningful Results for Faneuil Anna Van Buren, CEO of Faneuil, stated, During this quarter, Faneuil invested in additional resources to support our new commercial retail segment. Operations normalized following the completion of the CMO transition and results have been positive from initial digital innovations. We also added a key commercial healthcare client further securing our commitment to this sector. Faneuil recognized revenue of $48.0 million for the three months ended March 31, 2018 compared to $36.7 million for the three months ended March 31, 2017. Revenue increased $11.2 million, or 30.6%. Excluding the impact of the CMO Business acquisition, revenue increased $2.8 million, or 7.6%, due to increased revenue from new customer awards and our existing customer base. Faneuil recognized revenue of $51.5 million for the three months ended December 31, 2017. Faneuil recognized segment adjusted EBITDA of $2.9 million for both the three months ended March 31, 2018 and 2017. Higher expenses for training and call handling for the new CMO Business offset the increased net revenue recognized. Excluding the impact of the CMO Business, segment adjusted EBITDA decreased by $0.1 million, or 4.3%. Faneuil recognized segment adjusted EBITDA of $3.7 million for the three months ended December 31, 2017. Faneuil recognized revenue of $99.4 million for the six months ended March 31, 2018 compared to $74.8 million for the six months ended March 31, 2017. Revenue increased $24.7 million, or 33.0%. Excluding the impact of the CMO Business acquisition, revenue increased $7.7 million, or 10.3%, due to increased revenue from new customer awards and our existing customer base. Faneuil recognized segment adjusted EBITDA of $6.6 million for the six months ended March 31, 2018 compared to $6.7 million for the six months ended March 31, 2017. Higher expenses for training and call handling for the new CMO Business offset the increased net revenue recognized. Excluding the impact of the CMO Business, segment adjusted EBITDA decreased by $0.1 million, or 1.0%. 3
Faneuil estimates its revenue for the three months ending June 30, 2018 to be in the range of $38.5 million to $42.7 million, compared to $39.5 million for the three months ended June 30, 2017. Faneuil s contract backlog expected to be realized within the next twelve months as of March 31, 2018 was $98.4 million compared to $92.3 million as of March 31, 2017 and $97.8 million as of December 31, 2017. Faneuil s total contract backlog as of March 31, 2018 was $254.4 million as compared to $241.2 million as of March 31, 2017 and $274.6 million as of December 31, 2017. Results for Carpets Steve Chesin, CEO of Carpets, stated, We continue to focus on implementing cost reduction initiatives and driving efficiencies throughout the operations, particularly in our granite facility. The Las Vegas housing market continues to be supportive for our business model. Carpets recognized revenue of $18.7 million for the three months ended March 31, 2018 compared to $17.9 million for the three months ended March 31, 2017. Revenue increased $0.8 million, or 4.4%, which was primarily attributable to higher volumes from commercial sales. Carpets recognized revenue of $16.7 million for the three months ended December 31, 2017. Carpets recognized negative segment adjusted EBITDA of $0.2 million for the three months ended March 31, 2018 compared to segment adjusted EBITDA of $0.3 million for the three months ended March 31, 2017. Segment adjusted EBITDA decreased by $0.5 million due to higher material, labor, and customer service costs, which exceeded revenue growth. Carpets recognized negative segment adjusted EBITDA of $0.7 million for the three months ended December 31, 2017. Carpets recognized revenue of $35.3 million for the six months ended March 31, 2018 compared to $33.4 million for the six months ended March 31, 2017. Revenue increased $1.9 million, or 5.7%, which was primarily attributable to higher volumes from builder and commercial sales. Carpets recognized negative segment adjusted EBITDA of $1.0 million for the six months ended March 31, 2018 compared to segment adjusted EBITDA of $0.2 million for the six months ended March 31, 2017. Segment adjusted EBITDA decreased by $1.2 million due to higher material, labor, and customer service costs, which exceeded Carpets revenue growth. Carpets estimates its revenue for the three months ending June 30, 2018 to be in the range of $15.0 million to $18.0 million, compared to $18.5 million for the three months ended June 30, 2017. Carpets contract backlog expected to be realized within the next twelve months as of March 31, 2018 was $8.4 million compared to $29.8 million as of March 31, 2017 and $17.9 million as of December 31, 2017. Carpets total contract backlog as of March 31, 2018 was $42.1 million compared to $71.5 million as of March 31, 2017 and $52.3 million as of December 31, 2017. Results for Phoenix Marc Reisch, CEO of Phoenix, stated, The increase in second quarter revenues for Phoenix was due to sales from the Printing Components Business acquisition, completed on October 2, 2017, and higher component and book sales, offset in part by expected lower sales in packaging. Segment adjusted EBITDA of $5.5 million was $0.6 million higher than prior year due to sales from the Printing Components Business acquisition, and higher component and book sales, offset in part by the lower packaging sales, and startup costs related to the transition of packaging and commercial print manufacturing. The transition is scheduled for completion during the third quarter. Phoenix recognized revenue of $28.5 million for the three months ended March 31, 2018 compared to $24.7 million for the three months ended March 31, 2017. Revenue increased $3.8 million, or 15.4%. Excluding the impact of the Printing Components Business acquisition, revenue increased $0.1 4
million, or 0.6%, due to higher component and books sales offset by planned lower revenues in packaging. Phoenix recognized revenue of $26.8 million for the three months ended December 31, 2017. Phoenix recognized segment adjusted EBITDA of $5.5 million for the three months ended March 31, 2018 compared to $4.9 million for the three months ended March 31, 2017. Segment adjusted EBITDA increased by $0.6 million, or 12.3% mainly due to the Printing Component Business acquisition somewhat offset by reduced net revenues in packaging. Phoenix recognized segment adjusted EBITDA of $4.2 million for the three months ended December 31, 2017. Phoenix recognized revenue of $55.3 million for the six months ended March 31, 2018 compared to $48.7 million for the six months ended March 31, 2017. Revenue increased $6.6 million, or 13.6%. Excluding the impact of the Printing Components Business acquisition, revenue decreased $1.5 million, or 3.1%, due to lower volumes for books and packaging. Phoenix recognized segment adjusted EBITDA of $9.6 million for the six months ended March 31, 2018 compared to $9.2 million for the six months ended March 31, 2017. Segment adjusted EBITDA increased by $0.4 million, or 4.4% mainly due to the Printing Component Business acquisition somewhat offset by reduced revenues in books and packaging. Phoenix estimates its revenue for the three months ending June 30, 2018 to be in the range of $26.7 million to $28.1 million as compared to $25.5 million for the three months ended June 30, 2017. Phoenix s contract backlog expected to be realized within the next twelve months as of March 31, 2018 was $70.2 million compared to $59.7 million as of March 31, 2017 and $71.6 million as of December 31, 2017. Phoenix s total contract backlog as of March 31, 2018 was $175.7 million as compared to $151.6 million as of March 31, 2017 and $188.1 million as of December 31, 2017. Non-GAAP Financial Measures In our earnings releases, prepared remarks, conference calls, presentations, and webcasts, we may present certain adjusted financial measures that are not calculated according to generally accepted accounting principles in the United States ( GAAP ). These non-gaap financial measures are designed to complement the GAAP financial information presented in this release because management believes they present information regarding ALJ that is useful to investors. The non-gaap financial measures presented should not be considered in isolation from, or as a substitute for, the comparable GAAP financial measure. 5
We present adjusted EBITDA because we believe it is frequently used by analysts, investors and other interes ted parties in the evaluation of our company. ALJ defines adjusted EBITDA as net (loss) income before interest expense, provision for income taxes, depreciation and amortization expense, stock-based compensation expense, restructuring expense, acquisition -related expense, (gain) loss on sales of assets, and other non-recurring items. Adjusted E B I T DA m ea s u r es a r e n ot calc u lated in t h e s a m e m a n n e r b y all c o m p a n ies a n d, acc ord i ng l y, m a y n o t b e an a ppro p r iate m ea s u r e f o r c o m p a r i s o n. Below are r ec o n ciliati o ns o f our net (loss) income, t h e m o s t d i r ect l y c o m p a r a b le G A A P m ea s u r e, to adjusted E B I T DA : Amounts in $000's Three Months Ended March 31, Net (loss) income $ (340) $ 392 $ (732) (186.7%) Interest expense 2,793 2,284 509 22.3% Benefit (provision) for income taxes (384) 695 (1,079) (155.3%) Depreciation and amortization 4,850 4,053 797 19.7% Stock-based compensation 270 174 96 55.2% Restructuring expenses 430 61 369 604.9% Gain on sales of assets (25) 4 (29) NM Consolidated adjusted EBITDA $ 7,594 $ 7,663 (69) (0.9%) NM - Not Meaningful Amounts in $000's Six Months Ended March 31, Net (loss) income $ (5,658) $ 943 $ (6,601) (700.0%) Interest expense 5,453 4,718 735 15.6% Benefit (provision) for income taxes 2,987 755 2,232 NM Depreciation and amortization 9,683 8,014 1,669 20.8% Stock-based compensation 563 357 206 57.7% Restructuring expenses 1,263 93 1,170 NM Acquisition-related expenses 123 123 Gain on sales of assets (232) 12 (244) NM Consolidated adjusted EBITDA $ 14,182 $ 14,892 (710) (4.8%) NM - Not Meaningful 6
Supplemental Consolidated Financial Information - Segment Revenue, Segment Adjusted EBITDA, and Debt Amounts in $000's Three Months Ended March 31, Net revenue Faneuil $ 47,953 $ 36,722 $ 11,231 30.6% Carpets 18,691 17,905 786 4.4% Phoenix 28,461 24,669 3,792 15.4% Total net revenue $ 95,105 $ 79,296 $ 15,809 19.9% Amounts in $000's Three Months Ended March 31, Segment adjusted EBITDA Faneuil $ 2,915 $ 2,929 $ (14) (0.5%) Carpets (240) 261 (501) (192.0%) Phoenix 5,459 4,863 596 12.3% Corporate (540) (390) (150) (38.5%) Total segment adjusted EBITDA $ 7,594 $ 7,663 $ (69) (0.9%) Amounts in $000's Six Months Ended March 31, Net revenue Faneuil $ 99,427 $ 74,773 $ 24,654 33.0% Carpets 35,341 33,449 1,892 5.7% Phoenix 55,291 48,691 6,600 13.6% Total net revenue $ 190,059 $ 156,913 $ 33,146 21.1% Amounts in $000's Six Months Ended March 31, Segment adjusted EBITDA Faneuil $ 6,625 $ 6,690 $ (65) (1.0%) Carpets (966) 215 (1,181) (549.3%) Phoenix 9,619 9,211 408 4.4% Corporate (1,096) (1,224) 128 10.5% Total segment adjusted EBITDA $ 14,182 $ 14,892 $ (710) (4.8%) As of March 31, 2018 and September 30, 2017, consolidated debt and consolidated net debt was comprised of the following ( exclusiveofdeferredfinancingcosts): Amounts in $000's March 31, September 30, 2018 2017 (unaudited) Term loan payable $ 89,795 $ 91,018 Line of credit 4,500 5,500 Capital leases 8,635 7,250 Total debt 102,930 103,768 Cash 2,947 5,630 Net debt $ 99,983 $ 98,138 7
As of March 31, 2018, ALJ was in compliance with all debt covenants. Financial Covenants Comparison March 31, 2018 (actual) (required) Leverage ratio 3.18 < 3.50 Fixed charges ratio 1.29 > 1.25 Revised Guidance Full Fiscal Year 2018 ALJ is revising guidance for its full fiscal year ending September 30, 2018 ( Fiscal 2018 ) due to the underperformance of (i) Faneuil s CMO Business, and (ii) Carpets. After experiencing transition challenges, which caused an extended integration period and increased costs, Faneuil continues to invest in its strategic CMO Business acquisition, which aligns with ALJ s long-term strategy. Carpets had previously forecasted improved results for Fiscal 2018. Margins were impacted by higher than expected labor, material and customer service costs in the first half of Fiscal 2018. Carpets has implemented a cost reduction plan, which include headcount savings totaling more than $2.0 million on an annualized run rate. ALJ s original and revised guidance is as follows: Fiscal 2018 Guidance Revised Original Consolidated adjusted EBITDA $31.0 - $34.0 million $36.0 - $39.0 million About ALJ Regional Holdings, Inc. ALJ Regional Holdings, Inc. is the parent company of (i) Faneuil, Inc., a leading provider of outsourcing and co-sourced services to both commercial and government entities in the healthcare, utility, toll and transportation industries, (ii) Floors-N-More, LLC, dba Carpets N' More, one of the largest floor covering retailers in Las Vegas and a provider of multiple finishing products for commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with 4 retail locations, and (iii) Phoenix Color Corp., a leading manufacturer of book components, educational materials and related products producing value-added components, heavily illustrated books and specialty commercial products using a broad spectrum of materials and decorative technologies. 8
Forward-Looking Statements ALJ s second quarter ended March 31, 2018 earnings release and related communications contain forward-looking statements within the meaning of federal securities laws. Such statements include information regarding our expectations, goals or intentions regarding the future, including but not limited to statements about our financial projections and business growth, the impact of the CMO Business on Faneuil s operations, cost-cutting measures implemented by Carpets, the integration of Color Optics and Moore Langen by Phoenix, and other statements including the words "will" and "expect" and similar expressions. You should not place undue reliance on these statements, as they involve certain risks and uncertainties, and actual results or performance may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially are discussed in our annual report on Form 10-K and quarterly reports on Form 10- Q filed with the Securities and Exchange Commission and available through EDGAR on the SEC s website at www.sec.gov. All forwardlooking statements in this release are made as of the date hereof and we assume no obligation to update any forward-looking statement. 9